This image recently shared on LinkedIn and other social networks caught my attention, for both its comedic message and its more serious undertone.
The direct cost of hiring somebody into your business on a full time, part time or contract basis is relative straightforward to measure.
What’s not so simple is being able to identify the indirect costs and resources being used.
Most businesses endeavour to concentrate on the cost of every action taken, which is especially true for large projects.
But is this really the right focus?
Shouldn’t managing TIME be our primary concern? After all, time is the one resource that is impossible to stretch, move, or produce more of.
More often than not, it’s disregarded.
The businesses that function most efficiently and enjoy the highest levels of productivity are generally those that have a strong appreciation for opportunity cost.
Opportunity cost is defined as the ‘potential benefit lost of the other choices, when a decision is made’ (for more, see Wikipedia).
For example, choosing a sports car as your next personal vehicle may seem a great decision, however the opportunity cost of this choice may be that the second-preference car has better fuel economy and is therefore more efficient in the long run.
Opportunity cost is a major concept that underpins numerous economic theories in relation to scarcity and consumer choice.
The message in the image above is another great example of this.
Far too many businesses look only at the direct cost (in every sense, not just dollars) without considering the alternatives.
The ‘amateur’ may seem the right choice for your business right now as they provide a fast and inexpensive service. However, the opportunity cost of this decision will be the time, dollars and stress that could be found down the line after the decision is made.